How did GTES's Q4 2024 earnings surprise analysts?

Gates Industrial Corporation (GTES) exceeded analysts' expectations in its Q4 2024 earnings report with a non-GAAP profit of $0.36 per share, which was 8.7% above consensus estimates. Here's a detailed analysis: 1. **Revenue Performance**: - GTES's total revenue for Q4 2024 was $829.4 million, which was in line with analyst estimates of $825.6 million. This represented a 3.9% year-on-year decline. - The company's Power Transmission segment revenue was $520 million, marking a 1% decrease on a core basis. - The Fluid Power segment revenue was $309 million, reflecting a 5% core sales decline. 2. **Profitability**: - GTES reported an adjusted EBITDA of $180.8 million for the quarter, which was 1.8% above analyst estimates of $177.5 million. - The company's gross margin expanded by 130 basis points to 40.4% in Q4 2024, marking a record performance for a fourth quarter. - The adjusted EBITDA margin was 21.8% for the quarter, indicating strong operational efficiency. 3. **Shareholder Returns**: - GTES's adjusted earnings per share (EPS) was $0.36, surpassing analyst expectations of $0.33 by 8.7%. - The company's free cash flow conversion was 160% in Q4 2024, contributing to a full-year conversion of 74%. 4. **Guidance and Outlook**: - For the upcoming financial year 2025, GTES provided guidance with an adjusted EPS target of $1.36 to $1.52, which was below analyst estimates. - The company projected an adjusted EBITDA range of $735 million to $795 million for 2025, with a midpoint that was slightly below analyst forecasts. In conclusion, GTES's Q4 2024 earnings exceeded analysts' expectations in terms of profitability, with a stronger gross margin and adjusted EBITDA. However, revenue fell slightly below expectations, and guidance for the upcoming year was slightly below analyst forecasts. Overall, the company's performance reflects solid operational efficiency and a resilient business model despite softer demand in certain markets.